0% APR Credit Card

A look at 0% APR Credit Cards

0% Credit card - Free money?

Every day I get some 'junk' land post or email offering to free me of my debts by lending me more money via an introductory 0% APR credit card. How can credit card companies do such things and what's in it for them?

Why do companies offer 0% APR credit cards?

Simply as an incentive to sign up and take out their card. They are not interested in the money they will make during the introductory 6 months (or whatever) offer because they won't make any. Rather they see you as a long term customer who will continue to use their cards (and maybe other financial services) for years, maybe decades to come. Currently (touch wood) I am not in financial debt (apart from kids, wife and mortgage, oh and big Ron has threatened to break my legs) and so the 'I can't be arsed factor' is set at HIGH. Therefore, if anyone sends me offers to change and save myself less than $50 a year I simply don't bother. Whole courses at educational establishments are run about 'Fear of change' and managing change because people don't generally like change. It's a hassle, so get lost and leave me alone. You stick in your comfort zone and if you credit card repayments aren't crippling you, you simply keep paying them.

This principle is generally true of any low introductory offer, for many people, once they have you, that's for years and years.

There are several types of 0% credit cards on the market.

0% APR Balance Transfer Credit Card

  • What is it?
  • Any other fee's?
  • What about purchases and cash advancements?
  • How long is the 0% APR period for?
  • 0% APR on Purchases Credit Card

  • What is it?
  • Any other fee's?
  • What about an existing balance and cash advancements?
  • How long is the 0% APR period for?
  • 0% on Purchases and Balance Transfers

  • What is it?
  • Any other fee's?
  • What about cash advancements?
  • How long is the 0% APR period for?
  • What's the catch?

    The main issue is that the cards may have a 0% APR introductory offer but it will only last for between 3 and 12 months. After that you go back onto the credit card companies usual rate. This rate will probably be higher than you could otherwise obtain by looking for a longer term low-interest rate credit card. For example the typical APR of some of the 0% on balance transfers or purchases credit cards I found were 16-18%. Whilst, If I looked for a low rate credit card I could obtain one, in theory, for about 7%. It's also worth shopping around as I whilst most of the zero introductory offer cards were 16-18% a few, with less additional frills, were down at around 9-10%, but not many and some of these interest rates were base upon credit history.

    The additional catch is, as previously mentioned, they have you on the customer base, but of course you can change it after the introductory offer has finished can't you? 

    Why not keep 'credit card jumping' from one 0% APR card to another?

    That's the purpose of the balance transfer fee, there are still some credit card companies that do not charge one but there are getting fewer. Depending on the balance and how much interest you would pay you still could save money by switching from one 0% APR to another.

    Another to watch out for is credit rating. It isn't an exact science and is evolving based on the current financial preferences so it may be in the future you get penalised for switching credit card many times, even if you keep them all.

    Conclusion

    Obviously they can be a win-win situation for consumers and credit card companies. You get a 'free loan' of some money for a while and they potentially get your long-term business. Just be wary of the high APR cards after the introductory period and have a look at the balance transfer fee's. As always shop around! 

    Best Buy Credit Cards

    Check out the table below for the current Best Buy Credit Cards, as researched by MoneyExtra



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